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GAO Report Shows Illegal Subsidy Payments Were Made

posted on December 5, 2008

Hello, I'm Mark Pearson. Recently, the National Bureau of Economic Research confirmed what everybody already suspected -- America has been in a recession since December of 2007.

This news was bolstered as the Bureau of Labor Statistics announced the unemployment rate reached 6.7 percent in November, the highest in 15 years.

Unemployment numbers were spurred along as employers cut 533,000 jobs last month, the largest drop since 1974.

The news was not treated kindly by Wall Street as the Dow Jones Industrial Average fell more than 600 points at the beginning of the week.

Among those factors pushing the market lower are automakers who experienced an almost 40 percent drop in sales, a 26-year low.

While the Big Three automakers went to Washington with hat-in-hand to ask for more government dollars, those in farm country actually received a bit of good news. USDA says farmers will generate record net farm income of $86.9 billion.

The increase in farm income means lower subsidy payments from government coffers. According to a recently released report, the General Accountability Office, or GAO, says about 2 million farmers receive nearly $16 billion annually. But the GAO white paper revealed all was not as it seemed. It identified more than 2,700 recipients who were paid almost $50 million between 2003 and 2006 that were technically ineligible for payments.

GAO Report Shows Illegal Subsidy Payments Were Made GAO officials accused USDA of making the inappropriate payments using faulty information. USDA officials fired back saying they are legally prohibited access to the same Internal Revenue Service data the GAO used to create the report. To make an eligibility judgment, USDA agents rely on individuals admitting when their adjusted gross income or AGI exceeds the legal limit. Language in the 2002 Farm Bill denies payments to those who derive less than 75 percent of their income from farming, ranching, or forestry or if they earn more than $2.5 million AGI.

Also included in the report were data on payments to deceased farmers. Though GAO officials were unable to give an accurate total, records indicated USDA paid $1.1 billion between 1999 and 2005 to 170,000 farmers who were no longer alive.

President-elect Obama is already on the record saying subsidy payments to millionaires need to be stopped allowing more of the money to be distributed among small and medium sized farmers.

President-elect Barack Obama: (November 25) "There's a report today that from 2003 to 2006, millionaire farmers received $49 million in crop subsidies even though they were earning more than the $2.5 million cutoff for such subsidies. If this is true, it is a prime example of the kind of waste I intend to end as president."

During Obama's tenure as a Senator he has supported eligibility restrictions for farmers earning less than $250,000 adjusted gross income.

Congressman Collin Peterson, a Minnesota Democrat and Chairman of the House Agriculture Committee, passed-off Obama's comments saying farm subsidies were an easy target when talking about government waste. Nevertheless, Peterson, a supporter of subsidy reform, said payments to millionaire farmers was an issue that needed to be addressed.

Next week, a group of farm-subsidy reformers from the House will meet with members of the President-elect's transition team to discuss possible changes to farm programs. The 2008 Farm Bill contained the first caps on income, restricting payments to those earning less than $750,000 A-G-I.

Tags: agriculture government money news